ISBN 85694 239 1
Guernsey Historical Monograph No. 23
General Editor: J. Stevens Cox, F.S.A.
BEAT THE BANKERS
The story of how the Island of
Guernsey created its own money,
without cost to the taxpayer,
and established a prosperous
community free of debt.
MOUNT DURAND, ST. PETER PORT,
A NOTE ON THE WRITER, EDWARD HOLLOW AY.
Holloway was a founder member and has been
Honorary Secretary of the Economic Research Council
since 1955. He also edits a quarterly journal— Britain and
He became interested in economic and monetary
policy in the depression years of the 1 930s and founded
the Economic Reform Club and Institute in 1936. The main
objective of this organization was attained with the setting
up by H.M. Government of the Radcliffe Committee on
credit and currency in 1957.
Holloway has made a special study of economic
questions particularly in relation to monetary policy and
also international trade and payments. Over the years he
has lectured to hundreds of audiences including fifth and
sixth forms at many of the leading public schools, the
RAF, Navy etc. He is joint author of "Money: The Decisive
Factor", published in 1959. Other publications include
"The Case for an Atlantic Free Trade Area" in 1967,
"Inflation and the Function of Monetary Policy in Britain" in
1971 and "Honest Money: The Case for a Currency
Commission" in 1976.
He sponsored a 'Programme for National Recovery' in
1967. This programme was supported by 19 economists
and industrialists and resulted in the publication of live
research reports which have played a significant part in
changing the climate of opinion in the sphere of economic
and monetary policy.
New Arcade and Market Place, St. Peter Port, c.1840.
After a lithograph published by M. Moss, bookseller,
by James Glyn Ford
This pamphlet, "How Guernsey Beat the Bankers", is a
reprint of one issued in 1958 by the Social Credit
Movement. It tells how the Guernsey States from 1819-
1836 manipulated the issue of notes to allow a number of
public works to be carried out — including both the
construction of the Guernsey Market and the rebuilding of
Elizabeth College — without increasing public debt. The
details are contained within the pamphlet itself. The
author, rightly, saw this as an anticipation of the idea of
social credit. As such, for the very different audience that
will read it now, a very brief background to the ideas and
history of the Social Credit Movement in Britain may prove
The Movement's origins lay with the economic theories
of Major C.H. Douglas, who early this century wrote a
number of books explaining that the then current economic
problems were caused by the arbitrary control of the money
supply by the banks and bankers. He proposed that money
backed by gold or paper should be replaced by notes backed
by the real wealth of nations, their goods, plant and
machinery. A consequence of this would be that the
parasitic role of bankers in the economy would be removed
and the economy would as a result expand.
Social Credit ideas have never become widely accepted
although in the 1930s they gained some currency. In 1929
a Social Credit Party was established in Britain under the
leadership of John Hargrave. The 1930's was a time of
political upheaval, and the Social Credit Party's para-
military Greenshirts added another hue to the colourful
street demonstrations of the decade, with the marching
and countermarching of Moseley's Blackshirts, the red
shirted Independent Labour Party and the khaki of the
communists. At their peak in 1933 the Greenshirts could
call on 10,000 supporters for their demonstrations in
Britain's cities. At times the personification of their
campaign of 'out with the Vipers' (i.e. the bankers) took on
an anti-semitic flavour.
The beginning of the end for them came in 1936 with the
passing of the Public Order Act which banned political
uniforms. Deprived of the presence that came with the
impact of marching uniformed ranks they, along with their
colourful counterparts, faded from the scene. All that
remains in Britain now is a small group of enthusiasts.
Elsewhere in the English speaking world the Social Credit
Movement has had a fitful existence. Both New Zealand
and Canada have elected Social Credit M.P.'s to their
national parliaments. At provincial level in Canada they
have had strong support in Quebec, and in Alberta formed
the government. Even in these areas they are now in
The announcement by the Chancellor of the Exchequer
in his budget speech that he intends to set up a committee
to inquire into monetary and credit policy is bound to focus
attention on the workings of our financial system. Over the
years there have been many interesting monetary
experiments undertaken in various parts of the world.
These have mainly taken place in small communities but
they are none the less of interest. For example there was
the experiment in the island of Guernsey in the period
following the Napoleonic wars. There ware also
experiments in the towns of Swanenkirchen in Bavaria and
Worgl in the Austrian Tyrol which took place in the years of
depression following the 1914-18 war. Another
interesting example is the amazing development which
took place in the island of Gosaba off the coast of India.
These and similar experiments had one factor in common.
A depressed and unproductive community was changed in
a comparatively short while into an active prosperous and
The story of the island of Guernsey is particularly
interesting from our point of view for it is a relatively easy
matter to see for oneself the actual buildings which were
created — as a result of these experiments. For example
the Market House and Elizabeth College were two
examples of the result of the sensible money policy adopted
by the island Parliament in the early part of last century.
Other improvements included better roads, a modern
sewage system; all of which were constructed without a
debt being incurred by the community.
These experiments have a considerable bearing upon
our present monetary policy which, as is being
increasingly realised, is in need of considerable revision.
We make no apology therefore for re-telling the story of the
successful monetary experiment in Guernsey.
THE GUERNSEY MARKET SCHEME.
Our story opens in the year 1815. It was a year of
considerable difficulty for the people of Britain but the
people of the little island of Guernsey were particularly
hard hit. The effects of the Napoleonic wars had resulted in
a state of despair on the part of the island community due
to the acute economic distress then prevailing. The
following extract from a document presented by the States
(as the island Parliament is called) to the Privy Council
speaks very eloquently on the state of affairs:
"In this island, eminently favoured by nature,
nothing has been done by art or science towards the
least improvement; nothing for the display or enjoy-
ment of local beauties and advantages; not a road, not
even an approach to the town, where a horse and cart
could pass abreast; and the deep roads only four feet six
inches wide, with a footway of two or three feet, from
which nothing but the steep banks on each side can be
seen, appeared solely calculated for drains to the
waters which, running over them, rendered them ever
yet deeper and narrower. Not a vehicle, hardly a horse
kept for hire, no four-wheeled carriage existed of any
kind, and the traveller landed in a town of lofty houses,
confined and miserably-paved streets from which he
could only penetrate into the country by worse roads,
left the island in haste and under the most unfavour-
"In 1813, the sea, which had in former times
swallowed up large tracts, threatened, from the de-
fective state of its banks, to overflow a great extent of
land. The sum required to avert the danger was
estimated at more than £10,000, which the adjoining
parishes subject to this charge were not in a condition
to raise. The state of the finance was not consolatory,
with a debt of £19,137 and an annual charge for
interest of £2,390, the revenue of £3,000 left only
£600 for unforeseen expenses and improvements.
Thus, at the peace, this island round itself with little
or no trade, little or no disposable revenue, no
inducement for the affluent to continue their abode,
and no prospect of employment for the poor."
What a tale of woe. Small wonder that the people were
depressed and any that could were making their way to the
mainland. As often happens in communities when there
are major difficulties, a committee was appointed in 1815
to consider in particular the overcrowded state of the
market, of which it was said that "humanity cries out
against the crush which it is difficult to get out of, and
against the lack of shelter for the people who, often arriving
wet or heated, remained exposed for whole hours to wind
and rain, to the severity of the cold and the heat of the sun."
The committee examined the situation, and came to the
conclusion that further taxation was impossible. The
alternative was to try and borrow money from the banks.
But this entailed the payment of a high rate of interest,
which they could not afford, particularly in view of the fact
that these interest payments would continue for years and
would eventually mean that, although the original sum had
been repaid in interest charges, the capital sum would
remain as a debt.
Fortunately for the people of Guernsey, they had at that
time among their leaders some honest men of keen
intellect, who put forward the revolutionary suggestion
that the States should take advantage of their ancient
prerogative and produce their own notes to finance the re-
building of the market. At first this proposal was turned
down. But later in the same yearthe proposal to issue State
notes was agreed to, for a different purpose. The finance
committee reported that £5,000 was wanted for roads and
a monument to the late Governor, while they had only
£1,000 in hand. It was agreed that the remaining £4,000
should be raised by the issue of State £1 notes, 1,500 of
which should be payable in April 1817, 1,250 in October
the same year, and 1,250 in April 1818. "In this manner"
they said, "WITHOUT INCREASING THE DEBT OF THE
STATES, we can easily succeed in finishing the works
undertaken, leaving moreover in the coffers sufficient
money for the other needs of the States."
A SUCCESSFUL VENTURE.
How wise they were is proved by the event. The success
of this first creation of State money was so great that it was
rapidly followed by others. In June 1819 the question of the
market became ever more acute, and it was agreed to
finance the rebuilding of it, not in the orthodox manner by
raising a loan, but by the State creating the necessary notes
The following comment made by the finance committee
at a later date shows how successful the venture had
become. It was at the time when a further issue of notes
was made to diminish the interest-bearing debt to the
States. The finance committee declared: "The States could
increase the number of notes in circulation without danger
up to 10 000 in payment of the debt and the committee
recommends this course as most advantageous to the
States' finance, as well as to the public, who, far from
making the slightest difficulty in taking them, look for them
And so the story went on. On 29th March 1826 a further
issue was authorized to re-build Elizabeth College, which
had been founded in 1563 by Queen Elizabeth, and some
parochial schools. The Bailiff of that time — Daniel de Lisle
Brock — in his address to the States Assembly expressed
his belief that the creation of this new money was a great
benefit to the States, and caused no inconvenience
because of the great care with which it was issued.
Various other creations of new money took place for
projects of re-building, widening the streets of St. Peter
Port, reconstructing some of its buildings, making new
roads and public works of many kinds. The experiments
continued over a period of 20 years, by which time the
people of Guernsey had developed from a depressed
unhappy state to a position of prosperity and happiness.
The following brief quotation shows how improved was the
situation as a direct result of the wise and statesmanlike
action of the Island Parliament. Daniel de Lisle Brock, to
whom, it seems, much of the credit must go, said in 1827:
"To bring about the improvements which are the
admiration of visitors and which contribute so much to
the joy, the health and well-being of the inhabitants,
the States have been obliged to issue notes amounting
to £55,000. If it had been necessary and if it were still
necessary, to pay interest on this sum, it would be so
much taken from the fund earmarked to pay for the
improvements made and to carry out new ones.
To talk of joy, health and well-being is a very different
story from the position in 1815, when it was little or no
trade, little or no disposable revenue, and no prospect of
employment for the poor." But this happy state of affairs
was not to the liking of everyone, and opposition to the idea
of the Island States creating their own "debt-free" money
had been growing over the years, particularly among the
banking interests on the island. A new bank, called the
Commercial Bank, was founded in 1830. This institution,
together with the old bank, failing to prevent the growing
prosperity of the islanders, began to issue notes at its own
discretion, flooding the island with paper money.
Reference has already been made to the care exercised in
deciding the quantity of money to be issued by the States,
and now Daniel de Lisle Brock sought to restrain the private
banks from this anti-social activity.
There remains on record his spirited speech to the
States meeting held in September 1836 on this subject,
and the following two extracts are of particular interest:
"No one has a right to arrogate to himself the power
of circulating a private coinage on which he imprints for
his own profit an arbitrary value.
"With these facts before our eyes we must realise
the necessity of limiting the issue of paper money to the
needs and customs, and the benefit, of the community
in general. Permission cannot be granted to certain
individuals to play with the wealth and prosperity of
In spite of all, however, the banks finally won the day.
Despite a careful search of the records, no explanation of
what actually happened can be found — merely an
exchange of letters between representatives of the banks
and the Bailiff of the Island. In this, the former suggested
that the States should cease to make further issue, should
withdraw £1 ,500 from circulation, and have no more than
£40,000 in circulation. To this proposal the Bailiff agreed.
Having read the account of his fighting speech to the
States, it is difficult to understand what combination of
forces caused him to give way. But at least it can be said
that the inhabitants of the island benefited materially from
the monetary experiment which took place, when the
island Parliament created its own money — 'interest free'
over 1 50 years ago.
Although the original experiment came to an abrupt end
in 1836, there was a further development in 1914, just
after the outbreak of the first world war. The demand for an
increase in the supply of money was then so great that the
Royal Court passed an Ordinance making State notes and
those issued by the Banks legal tender. But the Banks were
prohibited from increasing their note issue, and all
additional notes were issued by the States.
There was a great demand for these States notes, and
they first had to be printed locally by two firms in the island:
the Star Company and the Guernsey Press Company, who
were able to provide what proved to be very serviceable five
shilling and ten shilling notes. These were later replaced
by notes printed on proper bank-note paper with the
customary watermark. The local banks have now been
absorbed by the Big Five, so that there is no other local note
issue, other than that of States notes which circulate
alongside the more familiar Bank of England notes.
Readers who would be interested to follow up the ideas contained in this
pamphlet are recommended the following publications:
Inflation — is there a cure? by Edward Holloway.
Expansion or Explosion by Antony Vickers. The Bodley Head.
Economic Tribulation by Vincent Vickers (one time Director of the Bank of
England). The Bodley Head.
Great Britain & World Trade edited by Edward Holloway.
All the above are obtainable from the Economic Reform
Club & Institute 2a Queen's Parade London N 10